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Principles of Governance

Trustfulness, Permissionfulness, and Diffusiveness
Systems of governance are challenging to design primarily because they tend to collapse into collusion, corruption, and plutarchy.

Here I propose three criteria for a system of governance that if implemented tend toward non-plutocratic behavior.

These are variations on the traditional principles of trustlessness, permissionlessness, and decentralization. These three principles are paradigmatic organizing principles of web3. However, in practice, these principles tend to suffer from vague definitions (e.g. what counts as “sufficiently decentralized”?) which plays into the hands of opportunists and grifters that claim the benefits of the web3 mantle without practicing its tenants.
In their place, I offer more rigorously defined alternatives. May that we might design and adopt better systems of governance.

Trustfulness is the term we'll use to refer to the property that no one must be asked to act contrary to their incentives.
Permissionfulness means that every user of a protocol has, in principle, the same capacity for effect as every other. There is no admin mode, nor backdoor, nor insuperable advantage for the wealthy.
Diffusiveness characterizes a protocol where power doesn’t accrue to any subset of users in such a way that undermines the previous two principles: trustfulness and permissionfulness.
Diffusiveness is a generalization of notions like "democratic", "pluralist", and "decentralized". The difference is that rather than invoking ambiguous platitudes like, "Everyone should have a voice" or "no one group should have too much power", the principle of diffusiveness says, "at every timestep permission and trust should increase." Whereas "democratic", "pluralist", and "decentralized" describe states, "diffusive" describes a vector; diffusiveness describes the intrinsic propensity of the system to tend toward diffusion of permission as a property of the underlying mechanisms.

We can formalize these ideas by saying that:
1. Trustfulness is maintained whenever the dominant strategy for all players yields the desired outcome.
2. Permissionfulness is maintained if every possible stable protocol state could have been proposed and enacted by any player independent of their wealth, status, time in the network, etc. One familiar expression of this idea in popular culture is the "anyone can cook" principle in the Pixar movie Ratatouille (which should not be confused with "everyone can cook").
3. Diffusiveness is achieved when permissionfulness and trustfulness don’t decrease in the subsequent system state. This can be framed as a type of trustfulness — since trustfulness is already a measure of incentive compatibility.

In symbols this might be:

Where
is the dominant strategy for some player n, P is the protocol, loss is the score to be minimized,
is some policy (series of strategies realized as moves) played by player i, and where
is the protocol’s state at timestep t.

While the principles of trustfulness, permissionfulness, and diffusiveness provide a useful framework for designing non-plutocratic governance systems, they do not specify exactly what the loss function should be that encodes the desired outcome for trustfulness. However, it is possible to imagine that the properties of a governance system built on these principles might naturally lend themselves to adjudicating this question. For example, anyone could propose a loss function to encode a desired outcome, and if that loss function is both permissionful and diffusive, it could potentially be adopted as a stable desired state. This approach would allow for a pluralistic system in which multiple loss functions could be considered, rather than having a single, predetermined loss function.

As a concrete example, consider a governance protocol with two contending loss functions. The first loss function is designed to enrich the proposers, while the second loss function is designed to establish a universal basic income (UBI). In this scenario, it is likely that the UBI loss function will win because it’s likely to increase permissionfulness over time. This is because a UBI would provide a stable source of income for the members of a community, which would increase their ability to participate in the governance process and have a say in the decisions that affect their lives. This, in turn, would lead to a more diffuse distribution of permission, which would align with the principle of diffusiveness. On the other hand, the loss function that enriches the proposers would likely result in a concentration of power and permission among a small group of individuals, which undermines the principles of trustfulness and permissionfulness. So, it seems likely that loss function which encodes UBI would beat out the plutocratic loss function in a governance system that follows the principles of trustfulness, permissionfulness, and diffusiveness.

The principles of trustfulness, permissionfulness, and diffusiveness offer a promising framework for designing non-plutocratic systems of governance. These principles emphasize the importance of fairness, inclusivity, and transparency, and can help to ensure that governance systems serve the common good rather than the interests of a privileged few.

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